Compensation for industrial accidents and incentives for prevention: a theoretical and empirical perspective

Abstract

This paper examines the compensation systems for industrial accidents in Belgium, Germany and Great Britain, thereby taking into account some recent empirical data on industrial accident rates and (although hardly available) amounts of compensation paid out to employee victims. The key question of this paper, derived from past research in law and economics, is whether these particular compensation systems include elements that may contribute to the prevention of industrial accidents. While the three countries examined here all have at least some incentive-based elements, notably in the way those systems are financed, there appears to be room for improvement both in Belgium and Great Britain. The German case study leads to the proposition that giving an organisation the responsibility for both compensation and prevention may have a beneficial effect on the accident rate.

The boundary conditions for regulation: Welfare systems, state traditions, and the varied governance of work safety in Europe

“…Therefore, following the law and economics argument that moral hazard is best avoided when those bearing the costs of risk are also responsible for regulation to reduce it (Philipsen, 2009), both the German BGs and French Caisses sought to supplement purely financial incentives with their own industry-specific private regulatory standards and inspection to reduce accident burdens and protect their funds. Bismarckian welfare states, having abolished tort in favor of no-fault compensation, needed to ensure the financial sustainability of the mutualist social insurance funds established to fund compensation by providing them with the means to internalize compensation costs and control moral hazard by their members.…”

“…However, the effectiveness of financial levers to keep these mutual funds solvent and incentivize workplace safety is limited, not least because, as mutuals, each fund entails a degree of risk pooling and premiums are necessarily limited to keep them affordable, on both insurance grounds of risk spreading and in response to pressure from more cost-sensitive firms. Therefore, following the law and economics argument that moral hazard is best avoided when those bearing the costs of risk are also responsible for regulation to reduce it (Philipsen, 2009), both the German BGs and French Caisses sought to supplement purely financial incentives with their own industry-specific private regulatory standards and inspection to reduce accident burdens and protect their funds.…”

“…Optimizing that balance can, in turn, depend on instrument choice, be it tort, insurance, or command and control regulation, each of which suffers from well-known constraints, such as victim access to tort, targeting of insurance premiums, and the adequacy of regulatory rules. Likewise, optimal balances are likely to depend on the organization of regulatory and welfare responsibilities, given public choice style arguments that the most effective and efficient means of reducing moral hazard is by ensuing that those bearing the costs of risk are also responsible for regulation (Philipsen, 2009).…”

Do sanctions spell disaster? Economic sanctions, political institutions, and technological safety

“…First, certain types of industrial and transportation technology are inherently more hazardous than others. Heavy industry and coal mining, for example, tend to be particularly accident prone (Philipsen, 2009).…”

Compensation in personal injury cases: mean or median income?

“…For example, a child will typically not have a profession. Nonetheless, a child's future work income will be a random variable drawn from a particular distribution.24 VanWijck and Winters (2001) andSingh (2004) focus on economic e ciency and optimal care, which topics are not addressed in this paper.25 This point is adressed in an empirical paper byPhilipsen (2009).…”